In 2018, ZCCM IH maintained its position as one of the most diversified investment companies in Zambia. With various interests in the energy, mining, agriculture and other sectors, it has positioned itself as the quintessential investment partner in the Zambian economy.
As Industrial development Corporation Ltd (IDC) highest dividend payer, ZCCM-IH’s financial statements for the period of 2015-2017 make for exciting reading due to the fact that the company continued to aggressively embarked on investments over the last two years in mining and finance and less in agriculture which when consolidated into their accounts led to key impairments being declared in the financial statements. This resulted in the company’s consolidated operating expenses being inflamed due to administrative costs caused by impairments from its takeovers in various sectors.
In 2018 the company’s revenue for the year ended 31st march 2018 reduced from K95 million in 2017 to 61 million in 2018. The decrease in the company’s turnover was attributed to the low sales at Ndola Lime Company Limited due to increased competition in lime market as well as technical challenges which negatively affected the production and sales of lime and related products according to the 2018 audited financials.
On the upper hand the group recorded a positive share of profit from equity accounted investee companies of K 689 million in 2018 compared to K189 million in 2017 which represented a 464% increase. The group reported a profit of K843 million in 2018 and (2017: K729 million) which represented a 16% increase that was driven by the improved production volumes of copper in most the groups investee companies according to the 2018 audited financials.
ZCCM-IH’s financial performance for 2018 has tremendously improved given its margin ratio which is 13.8% compared to 7.4% in 2017. The margin ratio indicates the proportion of sales being ‘captured’ by the firm as profit. The rise in margin was relatively minor at the gross profit level but becomes more rigorous when we move down the income statement. The Earnings per share also improved from 4.53 in 2017 to 5.25 in 2018 clear indicating that the shareholders will definitely enjoy their higher incoming dividends. Overall, the Group’s total assets increased by 8% from K9, 579 million (2017) to K10, 332 million (2018) on account of increase in the net assets of investee companies such as Investrust Bank Plc whose performance continued to improve during the year according to the 2018 audited financials.
ZCCM-IH’s chief executive officer (CEO), Dr Pius Kasolo, has over the past few years made no secret of the fact that he wants to grow his investment company’s group portfolio. Therefore, looking at the numbers Financial Insight believes that ZCCM-IH may perhaps also consider investing more in their agriculture portfolio which has shown little to no activity in the past few years.
For instance, investing in aqua-farming would be essential to achieving the Zambian government’s desire of a diversified and export-oriented agriculture sector leveraged on improving production and productivity from farm to agro-processing and manufacturing. With Zambeef attracting investment from CDC, Financial Insight believes that this is an area ZCCM IH may consider pondering on.
Most recently the Zambian government through the Ministry of Agriculture has invested over $1 million in aqua-farming parks within North-Western Province according to the Lusaka Times.
These aqua parks are expected to significantly contribute to Zambia’s seventh national development plan (7NDP) by increasing the management and utilization of water resources for agricultural development. The fish production has increased from 22,713 metric tonnes in 2016 to 27,658 metric tonnes in 2017 which represented a 22% increase.
The Ministry of Agriculture expects the annual fish production to increase to over 40,000 metric tonnes from the current 36,000 metric tonnes in 2019 according to the Lusaka Times. Therefore, it is perhaps important for Dr Pius Kasolo to consider investing more in the agriculture portfolio specifically in aqua-farming within other provinces over the next two years as it looks lucrative and promising.
For now, we looking forward to analyzing ZCCM-IH full annual report for 2018 and awaiting the upcoming AGM scheduled for 28th January 2019 for the shareholders to have their say and Dr Pius Kasolo to provide direction for the new financial year.
About the Author
Investment and Financial Analyst Contributor at Financial Insight Zambia.